BMW Net Profit Plunges Due to China Sales Drop and Brake Issues

Weak Market Demand and Technical Setbacks Hit Earnings Hard / Reuters

BMW, a titan in the premium automotive industry, has reported a staggering decline in its net profit for 2024, plummeting over a third to 7.68 billion euros ($8.32 billion), aligning with LSEG projections. This sharp downturn stems from a confluence of weakened sales in critical markets like China and Germany, compounded by costly delivery delays linked to persistent problems with the Integrated Braking System (IBS). The company forecasts its earnings margin for cars in 2025 to hover between 5% and 7%, a modest uptick at best from 2024’s 6.3%, as it braces for escalating trade tensions and fierce competition, particularly in the Chinese market. This detailed exploration unpacks the multifaceted challenges BMW faced, offering insights into how these factors eroded profitability and what lies ahead for the luxury carmaker.

The most pronounced blow to BMW’s financial performance came from its sales figures in China, where demand for premium vehicles faltered significantly. Sales in this key market dropped by 13.4% throughout 2024, reflecting a broader slowdown in consumer spending and intensified rivalry from domestic manufacturers excelling in the electric vehicle (EV) sector. China’s economic landscape, marked by price wars and government incentives favoring greener transportation, has squeezed foreign brands like BMW, whose third-quarter sales alone slumped by 13%, as reported by Reuters. Meanwhile, in Germany, BMW’s home turf, sales dipped by 5.3%, a decline attributed to economic uncertainty that curbed affluent buyers’ appetite for luxury cars. Despite a 16% surge in production at German plants, reaching 1,087,067 vehicles according to BMW Blog, this boost failed to translate into sales, underscoring a disconnect between output and market uptake that further strained revenue streams.

Compounding these market woes were significant technical hurdles tied to the Integrated Braking System, a sophisticated component central to BMW’s vehicle safety and performance. Throughout 2024, the IBS triggered multiple recalls affecting over 1.5 million cars worldwide, with issues ranging from increased pedal force to potential failures in anti-lock braking and dynamic stability control systems. These malfunctions, detailed in reports from BMW Blog and The BRAKE Report, necessitated delivery stoppages and swelled warranty costs into the high three-digit million-euro range, as noted by Just Auto. For instance, a recall in May impacted 371,756 vehicles, while another in October affected 11,579 units, highlighting the persistent nature of the problem despite attempted fixes. These disruptions not only hampered BMW’s ability to fulfill orders but also eroded consumer trust, adding a reputational cost to the financial burden.

Financially, the toll of these challenges was starkly evident in BMW’s quarterly and annual results. The third quarter of 2024 saw net profit nosedive by 83.8% to $508 million, a figure that foreshadowed the year-end total of 7.68 billion euros. This dramatic fall reflects not only the immediate costs of recalls and lost sales but also the strategic balancing act BMW must perform, investing heavily in electrification and digitalization projects like the NEUE KLASSE lineup amid short-term earnings pressure. Electrified vehicles, which include fully electric and plug-in hybrid models, accounted for 24.2% of BMW’s 2024 sales, per Just Auto, signaling a pivot toward sustainability that could bolster long-term prospects. However, the immediate outlook remains cautious, with the projected 5% to 7% earnings margin for 2025 suggesting a slow recovery as global trade wars loom and China’s competitive landscape intensifies.

To contextualize BMW’s struggles, a comparative glance at peers like Mercedes-Benz and Audi reveals a shared plight among German premium carmakers. Mercedes saw sales drop by 7% in China and 9% in Germany, while Audi faced declines of 11% and 21% in those markets, respectively, according to Reuters. This industry-wide trend underscores broader economic and competitive pressures, though BMW’s resilience in the EV space offers a silver lining. In Germany, where the EV market share fell to 13.51% in 2024 from 18.43% the prior year, BMW’s battery electric vehicle (BEV) share rose to 18.06%, driven by models like the iX1, dubbed the nation’s top-selling EV by BMW Blog. This success hints at BMW’s potential to carve out a stronger foothold in the shifting automotive landscape, even as it grapples with current setbacks.

For stakeholders and enthusiasts tracking BMW’s trajectory, the 2024 results paint a picture of a company at a crossroads. The interplay of declining sales in China and Germany, coupled with the IBS-related disruptions, has undeniably bruised profitability, yet BMW’s strategic focus on electrification and operational adjustments offers a pathway forward. The anticipated earnings margin for 2025, while modest, reflects a pragmatic acknowledgment of ongoing challenges like trade disputes and market rivalry. As BMW navigates this turbulent period, its ability to resolve technical issues swiftly, regain momentum in key markets, and capitalize on the EV boom will be critical to restoring its financial health and reinforcing its status as a leader in the premium automotive sector. This comprehensive analysis illuminates the depth of BMW’s 2024 struggles and the strategic levers it must pull to steer toward recovery.